Troubled waters in Selangor

8 December 2010

The Star

PETALING JAYA: What started out as a grand plan to restructure the
country's water sector, an idea that was mooted back in 2006, is
currently being rattled by the choppy reform efforts in one state -
Selangor.

Truth is, while the efforts to centralise water assets have taken off smoothly in many other states, the bad apple in the basket is Selangor, not least because of its fragmented industry.

The ultimate objective of the nationwide reform efforts, which consumers ought to be most interested in, is that it is hoped that by relieving the debt burden on the operations and shifting the onus to the Federal Government, clean and reliable water supply in a more regulated landscape will become the new norm.

That's easier said that done when you throw in politics into the mix, which is precisely what's been stonewalling the long, tedious and at times, bitter negotiations between the state and Federal Governments and the water concessionaires.

After extending the deadline to resolve the water impasse in the state countless times, it would appear as if the talks have come a full circle. Yet, there's no clear resolution in sight.

The Selangor government, in its latest attempt to take control of the water industry in the state, sent a memorandum to the Yang di-Pertuan Agong Tuanku Mizan Zainal Abidin.

This, says an analyst, is a clear indication that politics could be an overriding factor in the current predicament the state's water sector and its players have found themselves in.

There are four water players in Selangor - Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) which has the mandate to supply treated water to Kuala Lumpur, Selangor and Putrajaya, and water treatment companies Syarikat Pengeluar Air Sungai Selangor Holdings Bhd, Puncak Niaga (M) Sdn Bhd and Konsortium Abass Sdn Bhd.

One of the main issues of the Selangor water restructuring has to do with the proposed tariff hike by Syabas which has been deferred pending the restructuring talks.

Syabas was supposed to raise tariffs by 37% in January 2009 as per the concession agreement, but that did not materialise as the Pakatan Rakyat-led Selangor government claimed that Syabas did not fulfil certain criteria for that hike.

Selangor claimed it was crucial for it to take over the state's entire water industry to ensure that the people received cheap and good quality water.

The state's Water Review Panel member Charles Santiago, who is also Klang MP, had reportedly said recently that Selangor would be forced to spend more money if the water impasse persist.

If the state government does not take over, there will be a 37% tariff increase followed by 25% and 20% increases within the next six years, he said.

He added that with the state managing the water industry, the tariff increase would only be an initial 12% followed by two 12% rises within the same time frame.

The state will not make any profit but merely produce and provide cheap and clean water for the people, he said.

The state government had previously made two offers to the concessionaires: one for RM5.7bil that was rejected by all players and another RM9.4bil offer that was rejected by Syabas. The Federal Government also made a RM10.3bil offer which was rejected by Syabas.

Even one of the concessionaires, Gamuda Bhd, had stepped in with a takeover proposal which was, however, rejected on the basis that it was not in line with the spirit of the reforms.

The man tasked with addressing this major headache is Energy, Green Technology and Water Minister Datuk Seri Peter Chin Fah Kui, who recently said the ministry had given the state government until the end of this month to resolve the issue.

Note - this is not the first time the ministry has slapped a deadline to conclude the talks.

The saga took another twist over the week. An official from the Selangor Mentri Besar's office said the state government had received a letter from the ministry to make direct offers to water companies to buy back their concessions.

This was confirmed by Selangor Menteri Besar Tan Sri Khalid Ibrahim who, through a Twitter message on Monday, claimed that the state government had received the letter from the ministry.

Yet, the ministry has thus far puzzlingly remained silent on whether or not this is indeed the case. If it is, it would mean the heated talks have come a full circle.

The concern is that nothing has changed except that the delay has made a more compelling case for an urgent resolution of the water impasse as certain water players face rising financial pressure, more specifically Syabas.

If the Selangor government had not managed to get everyone to agree or stay on the same page months ago, when it was leading the talks with the concessionaires, how is it any different this time around?